Mutual Funds

What are the Advantages of Mutual Funds?

In line with global trends, investment options are proliferating at a growing clip in our country. Determining the most suitable investment instrument to suit an investor’s needs; monitoring economic developments after the investment on a daily basis and switching to other instruments when necessary; choosing the most appropriate distribution/combination from among local and foreign investable asset categories with professional expertise; monitoring the due dates of the assets and the application periods to exercise pre-emptive rights for stocks in the portfolio, above all necessitate a good deal of time and knowhow. As such, mutual funds managed by professional managers are instruments that provide investors relief from all such burdens.

What Needs to be Considered When Investing in a Mutual Fund?

It should be kept in mind that mutual funds also carry risk, to an extent that varies on the basis of type of fund. Generally speaking, high return potential also implies high risk potential. As such, investors should opt for mutual funds that suit their personal return and risk expectations.

Investors should analyse the past performances of the types of mutual funds they choose. Information regarding monthly or annual returns generated by a mutual fund preceding the time of their assessment may be requested from the founder, while also being published in newspapers and magazines. Nevertheless, one crucial factor to keep in mind is that the past performance of a mutual fund is no guarantee of future results.

The proposed investment duration and the investor’s investment horizon are crucial in terms of choice of mutual fund. Mutual funds that include stocks in particular should be perceived as long term investment instruments.

Investors may request instructive sources on mutual funds from HSBC Bank branches, as well as from HSBC Telephone Banking 0850 211 0 111.

What Should be Considered When Making a Choice Among Mutual Funds?

It might be beneficial to consider the following factors when choosing from among mutual funds active in the market:

Assets invested in by the Fund; the Fund’s benchmark or threshold level; the umbrella fund type with which the Fund is affiliated; the past returns of the Fund; the founder of the Fund and other funds managed by the founder; the Fund’s most recent portfolio content; the portfolio manager managing the Fund; yield levels generated by the founder in the past in various fund types, and comparative performance versus funds in the same category; locations where the participation certificates of the Fund may be purchased and sold, as well as trading hours; and whether a notice period is stipulated to convert the Fund Participation Certificates into cash.

What is a Notice Period?

As an investor, you have the right to sell the Participation Certificates at your convenience and collect the proceeds. However, provided that it is specified in the fund statutes, some fund founders apply a notice period of a few trading days to sell Participation Certificates back to the founder, in a bid to make the Fund’s cash arrangements. In this case, the investor is obliged to notify the founder of his/her transaction plans based on the specified number of working days in advance.

What are the Buying-Selling Principles for Funds Subject to Forward Pricing?

What is Turkey Electronic Fund Distribution Platform?

As per the Capital Markets Board’s Policy Decision No. İ-SPK.52.2 (dated 07.03.2014 No. 7/215) in the framework of the new Capital Markets Law, our Bank is also required to sell the participation certificates of all mutual funds that are members of and registered with the Turkey Electronic Fund Distribution Platform (TEFAS), which has been established by the Borsa Istanbul and managed by the Istanbul Clearing, Settlement and Custody Bank Inc. (Takasbank). TEFAS Platform has become active as of January 9, 2015. As of this date, the buying-selling of participation certificates of mutual funds (excluding Private Funds, Hedge Funds, Real Estate Mutual Funds, Venture Capital Mutual Funds, Guaranteed Funds, and Capital Protected Funds) is undertaken via TEFAS Platform. The statutes and prospectuses of all mutual funds that are members of TEFAS Platform may be accessed via www.kap.gov.tr.

The purchase and sale of Participation Certificates of HSBC Portföy A.Ş. mutual funds and those of all other investment companies registered with TEFAS Platform are undertaken by HSBC Bank A.Ş. branches, internet banking, ATM, telephone banking, HSBC Portföy and HSBC Yatırım Menkul Değerler A.Ş. with no additional fees or commissions.

Likewise, the Participation Certificates of HSBC funds traded on TEFAS Platform may also be bought and sold via investment firms that are members of TEFAS Platform.

Your fund purchase-sale order that is transmitted to the Platform may fail to be executed by the closing time of the Platform, though this is of limited probability given the operating rules of the Platform. In such a case, you will be notified with an SMS text message at no cost.

Buy-sell orders for the funds of institutions other than HSBC will be received within the operating hours of the Platform (For same value date fund transactions 08:45-13:30 on business days, 08:45-11:30 on half days; for forward value date transactions 08:45-17:30 on business days, 08:45-12:30 on half days), in the framework of the rules pertaining to the individual institution’s fund you are trading. For HSBC mutual funds excluding HSBC Asset Management Global ETF Fund Basket Fund, HSBC Asset Management Multi Asset Balanced Variable Fund (second variable) and HSBC Asset Management Multi Asset Dynamic Variable Fund (third variable), buy-sell orders continue to be received on a 7/24 basis excluding 17:30-18:00.

Takasbank has indicated that a 20% margin will be applied to prices in forward value date transactions, so as to guarantee the amount payable at the value date. As this margin will be applied to fund prices in your buy-sell orders, there may be differences in the amount of Fund Participation Certificates or in your account balance on the value date.

As “liquid fund sales” will be carried out for remuneration purposes in buy orders with a forward value date, “a tax liability may arise due to sale of liquid funds”, should the order be cancelled.

How are the Prices of Participation Certificates Calculated?

The Fund’s portfolio value is calculated on the basis of the closing prices of underlying assets in their respective exchanges. Total Fund Value is calculated by adding the receivables to the Fund’s portfolio value, and subtracting the payables. Dividing the calculated total fund value by the number of fund shares outstanding, the price of the unit participation certificate is calculated.

How does a Mutual Fund Generate Returns?

Interest income from fixed income instruments such as Government Bonds and Treasury Bills in the fund’s portfolio, dividends earned on equities within the fund, and profits generated from buy-sell transactions for the fund constitute the fund’s returns. Increases in the market values of underlying assets also prompt an appreciation in the portfolio value.

What are the Factors to Prompt Decreases in the Value of Fund Participation Certificates?

Due to reasons such as decreases in the prices of stocks and debt instruments within the fund portfolio on a given trading day compared to a day ago, or negative results of purchase and sale transactions performed for the fund exceeding the earnings, mutual fund unit values may face declines.

HSBC Bank A.Ş. and HSBC Yatırım Menkul Değerler A.Ş. have signed an Active Distribution Contract with HSBC Portföy Yönetimi A.Ş.; hence, all HSBC funds may be bought/sold through these institutions.

How are Participation Certificate Buyers Taxed?

As per temporary Article No. 67 of the Income Tax Law, sale of participation certificates of mutual funds established in accordance with the Capital Markets Law back to the founder is subject to 10% withholding tax.

As per temporary Article No. 67 of the Income Tax Law, of the mutual funds established in accordance with the Capital Markets Law, sale of participation certificates of stock-heavy funds back to the founder is subject to 0% withholding tax. Save for the provisions of Paragraph No. 5 of Article No. 24 of the Communiqué, should a fund fail to fulfil on a daily basis the conditions necessary for it to be classified as a stock-heavy fund, regarding those days when the conditions were not met, fulfilment of all the liabilities that the fund, investors and/or institutions buying and selling participation certificates will be subject to is the several responsibility of the portfolio founder and the custodian.

The Fund is subject to the tax regulations of the Turkish Republic. For further information about taxation, you may access the decision dated 2006/10371 of the Council of Ministers from the link.

How is My Investment Safeguarded in Mutual Funds?

Stocks, bonds and bills that constitute a given fund are kept at an account with Takasbank opened for the fund; and foreign securities are held by international custodians specified in the statutes. Participation certificates that belong to the client are registered under accounts in the name of the client with the Central Registry Agency (MKK).

How are Mutual Funds Audited?

Mutual Funds are subject to audit on a semi-annual and annual basis by independent audit companies, as per a contract. Sending the annual audit report to the Capital Markets Board is compulsory. The Board reserves the right to inspect mutual funds at will.

Where Should Investors Apply for Help and for More Detailed Information?